Reader Question: "All of my friends are buying houses... Should I be, too?"

One of the great things about learning the language of finance, is that money is everywhere. Well, not literally (although wouldn’t that be nice). But money is in every piece of news, every relationship, every milestone; every story has a money trail. It’s not like chemistry, where in order to really understand a concept, you need to go into a lab, put on your goggles and light some shit on fire. We see money everywhere. No Bunsen burner necessary. So why should we keep these stories in a vacuum? We shouldn’t.

So on The Money Minute, I’ll be using reader questions as examples to explain financial topics… and give you all the chance to have your questions answered one-on-one.

Kristen from Baltimore wrote to me with this question:

Hey Nicole! I’ve been seeing some of the people I went to college with posting pictures on Facebook about buying houses… and so now, of course, I’m wondering if I should be too. How do you know when it’s the right time to buy a house?

I get a ton of questions from folks strategizing how to best buy a house. How much should I save for a down payment? How do I know what I can afford? What sort of mortgage should I get? What’s the deal with income tax?

For now, forget all of those questions. The question you should be asking: is buying a house the best money move for you, at all?

I get it. A house is more than bricks and wood (or whatever houses are made of these days). A house is a home. You want to settle in, you want to nest... Again, I get it. Nest your face off. But if you want to really feel at home, your house should not put you in a financial prison. People break the bank over housing all the time because they assume buying a house is the right financial move. And it can be! But it’s not for everyone.

Not to mention, the housing market is still totally upside down because of the pandemic-related shifts, like being able to work remotely from anywhere, feeling safer in lower-density populations, wanting more space to work from home. Frankly, if you’re looking to buy a house… now is a pretty crummy time.

But if none of this has fazed you, there are three things you need to say “hell yes” to before even considering buying a home. They are:

1: You can afford it.

• • I mean, can you really afford it? Typically you need at least 20% of the cost of the house in cash for a down payment.

  • You can’t look at home-buying in a vacuum. If you have a bunch of credit card debt, don’t even think about asking me how you are going to buy a house. There are more important things to think about in your priority list! You need your debt gone-zo, emergency fund ready-to-roll, then and only then, can we have the home-buying discussion.

2: You are going to live in it for a while.

• • Life happens unexpectedly. I mean, this pandemic is pretty clear evidence for that. If you feel you know or have a strong hunch you’re going to need to move soon, or that you’ll need cash soon, you shouldn’t buy. A house is an asset, yes, but it’s an illiquid asset. Meaning, it’s hard to “melt” into cash when you need it.

3: You have a steady job that you love.

• • Job uncertainty makes for terrible timing to make an investment this enormous. Whether you’re unhappy in your job, or these crazy times put your job in jeopardy, the bottom line is: if you’re in the market for a new job, you should not also be perusing the housing market. If you don’t have a steady job, you should be leaving the door open (pun intended) for any opportunity that might come up-- which, should you take the job, might demand moving.

So, how’d we do? Did we check all three golden rules? If so, then mazel tov! Go forth and shop around… and stay tuned for more posts about mortgages, closing costs, and all that jazz.

If you did not check all these things off, you should not buy a house right now. And that’s okay! Just because you’re not positioned to buy a house right this second, doesn’t mean that you never will. It also doesn’t mean that you’re financially insecure. Keep up with The Money Minute, and I’ll get you in house-buying shape. Until you’re ready to take that step, you can enjoy not being your own landlord!

For now, our Money Minute is up. Until next time, don’t do anything with your money that I wouldn’t do!

xo,

GIF Credit:

Danger Force - Giphy

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